Patent Law: What is the best mode for the best mode disclosure requirement?

Bingbin Lu has an interesting short paper (9 pages only) on the best mode disclosure for patent applications. The author is answering two questions: whether a developing country should implement the best mode disclosure requirement and if so, how to best implement it?

Although the best mode disclosure requirement is optional for WTO member states in article 29 (1) TRIPs, Lu comes to the conclusion that developing countries need it. According to Lu it should be disclosed in the best mode known to the inventor, (which is in my subjective perception quite subjective) and Lu argues that a refusal to disclose this best mode must be a reason to refuse the grant of patent.

China's best mode disclosure requirement is called "preferred/optimally selected or specified mode for use" disclosure requirement in Rule 18 (5) of the Implementing Regulation of the Patent Law.

As Lu asserts Rule 18 is not a part of the Patent Law and therefore it cannot be a reason for refusal of a patent grant. According to Lu the State Intellectual Property Organisation (SIPO) has never enforced a preferred disclosure requirement in invalidation or appeal cases. Then again Lu explored the question whether developing countries should implement the best mode disclosure. The question is whether China can be easily labelled as a developing country or a developed country. China is both. To label China on a province level might be more meaningful.

Read Lu's paper here (pdf).

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Whitebook on IP Protection in 2010: Is White the New Black?

Photo Danny Friedmann

A: "Milestones of the past 

don't equal

 beacons to the future" 

B: "That is so 2010!"

The 12th Five Year Plan (2011-2015) has already started but its interesting to see what happened during the last year of the 11th Five Year Plan (2006-2010). If you don't know your history, you don't know your future, as Bob Marley already sung, right? The State Intellectual Property Office (SIPO), although it is only responsible for the protection and enforcement of patents, published a rather self-complacent "whitebook" on Intellectual Property Protection in 2010. Let us put it this way, it is great to say what has been done, but on the enforcement front there is still a lot of work to be done.

Readers of this blog know that its author does not believe in mass campaigns such as Operation Strike of the Sword and Swordnet. Not because they do not sound cool, they do. The problem is they do not work in the longer run, read more here.

This time I skip Benjamin Disraeli's phrase, because Thomas Miles, who researches judicial behaviour cracked a relevant joke during the 2011 Coase Lecture in Law and Economics: "Lawyers have only two reactions to a statistical analysis: it's either obvious, or wrong."

Statistics about patent applications are interesting but in the end only the granted patents count:
SIPO granted 814,825 patents: a year-on-year increase of 40.0%.

• 740,620 were granted to domestic applications, representing 90.9% of the total and a year-on-year increase of 47.6%; 
• 74,205 were granted to foreign applications, representing 9.1% of the total and a year-on-year decrease of 7.5%. 

So how to explain the decrease of patents granted to foreign companies/individuals, while the applications year-on-year rose by 13,9 percent?  

Percentage of domestic patent applications granted: 740,620/1,109,428 = 67 percent
Percentage of foreign patent applications granted: 74,205/112,858 = 66 percent.
So that is nearly the same. Are we seeing now the delay of the financial crisis or a lack of trust in the Chinese patent system in Europe and the U.S., which resulted in not many applications before 2010, so that in 2010 there is a decrease? And that in 2010 the applications increased?

However, although the information was not provided, I think one must also know about what kind of patents we are talking. In former years foreign companies/individuals often applied and were granted a much higher percentage of invention patents, while Chinese companies/individuals often applied for and were granted utility patents (to harness incremental innovation).

The aggregated information for both domestic and foreigner companies/individuals:

• 135,110 invention patents were granted, representing 16.6% and a year-on-year increase of 5.2%.
• 344,472 utility model patents were granted, representing 42.3% of the total and a year-on-year increase of 69.0%; 
• 335,243 industrial design patents were granted, representing 41.1% of the total and a year-on-year increase of 34.3%. 

For the 12th Five Year Plan the Chinese government wants to increase invention patent ownership from 1.7 per 10,000 people to 3.3. The arguments against using this kind of ratios to achieve innovation I give in my post Patents in China: Quantity obsessed, quality challenged.

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Fast Technology Transfer/IPR Infringements Slows Down China's High Speed Train

Photo: Danny Friedmann
High-speed train just got slower.
Getting a ticket even more so.

Infringed intellectual property rights can have negative influences on society. During the manufacturing process of these goods labour and environmental minimum standards, already challenged in China, can be ignored without ever being checked. Then the products of the manufacturing process can cause real safety challenges to the public.

China's high profile high-speed trains were so rapidly developed without much consideration to foreign IPR rights, see here. Now it becomes clear that not only IPR infringements were condoned, but that some safety standards seem to have been skipped altogether too, see here.

The Railways Ministry announced that the trains now need to slow down from 218 miles per hour (350 kilometers per hour) to 186 miles per hour (almost 300 kilometers per hour).

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Shake or Crush Your Hand: Huawei versus ZTE versus Huawei

Photo: Danny Friedmann
Shake Or Crush Your Hand, you choose. 

What if you are developing a product but your competitor has patented some technology needed to achieve the technical result? And at the same time you have some patents that you know you competitor likes to use? You might consider to cross-license. However, from a patent strategy point of view, excluding your competitor from some crucial technology might be the best thing to do.

Bien Perez reports in the South China Morning Post (April 30, 2011): "Huawei had also invited ZTE on many occassions to enter into cross-patent licensing negotiations, but was unsuccessful."

Then April 28, Huawei sues ZTE in Germany, France and Hungary for alleged patent infringement related to its data card and Long Term Evolution standard (candidate for 4G mobile communication standard) technologies, and trademark infringement.

April 29, ZTE counter sues Huawei for alleged patent infringement on Long Term Evolution.

"Proxy PRC Courts" in Europe and now also China

China Hearsay's Stan Abrams is not surprised that the legal fight "in a most non-harmonious fashion" between two Chinese giants took place overseas, see here.

It is interesting that Chinese competitors fight some patent and trademark issues abroad. But I think it becomes really interesting now that ZTE has sued Huawei in China. ZTE also threaten to take a series of legal actions globally to protect its IPR rights.

UPDATE:  The Hungarian site Portfolio.hu has a picture provided by Huawei that it uses to proof that ZTE is infringing its trademark. See Porfolio.hu's article Huawei files patent, trademark lawsuits against ZTE, rival rejects charges.

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Pfizer Starts R&D in China After IPR in China Challenges

Photo Danny Friedmann
Perilous hills, but nice view.
Climb worth the risk?

As one of the first U.S. companies pharmaceutical giant Pfizer has decided to start doing R&D in China. This way the company can probably take advantage of indigenous innovation preferential rules if it invents and patents in China. Read here.

Pfizer had some IP challenges in China. To brush up your memory, here is a summary of how Pfizer bot back its Viagra patent:

• September 19, 2001 SIPO granted a patent for Viagra's active ingredient;
• A dozen Chinese pharmaceutical companies file a petition to invalidate the patent, alledging that it failed adequate disclosure under article 26 Patent Law (at the time Patent Law 2000) and lacked novelty as required by article 22 Patent Law (at the time Patent Law 2000);
• July 7, 2004 Patent Reexamination Board invalidated Pfizer's Viagra patent because it failed to meet the disclosure requirement;
• September 28, 2004, Pfizer appealed the Patent Reexamination Board's decision at the Beijing No. 1 Intermediate People's Court;
• June 2006 Beijing No. 1 Intermediate People's Court reversed the invalidation and remanded the case to SIPO for further determinations;
• The Chinese pharmaceutical companies appealed to the Beijing High People's Court;
• September 7, 2007 Beijing High People's Court upheld the Beijing No. 1 Intermediate People's Court.

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Trends Counterfeit Trademarks/Infringed Patents From China: Smaller Scale, Bigger Risks

Two trends can be abstracted from the 2010 report of the Austrian Federal Finance Ministry to the National Council about the application of Council Regulation (EC) 1383/2003 of July, 22 2003, concerning customs action against goods suspected of infringing certain intellectual property rights and measures against goods found to have infringed such rights. According to the report these trends are in line with the other countries of the European Union.

Unlike in the movie
Matrix, there is no choice
between a blue or red pill.

Only blue pills.
But which one is real?

• Trend 1. From containers and trucks to postal packages via internet

The Austrian customs administration in 2010 seized 2,803 cases after it implemented the EC Counterfeiting Regulation 2004, these consisted out of 292,606 articles. This resulted in (because sometimes a consignment involves more than one person) 4,038 prosecutions. The products represent a value, if they were genuine goods, of € 6,765,057. This is much less than in 2009, when the amount was 16 million euro. So smaller amounts representing lesser value per consignment. These were ordered via the internet and send via the postal service.

• Trend 2. From counterfeit luxury goods to counterfeit daily products with lower original prices
and higher risks

Mass consumer products such as food, cosmetics and hygiene products, auto spare parts, toys and equipment, with all inherent health and safety related risks. Fake drugs were mainly lifestyle drugs such as sexual enhancers, diet pills and hair growth preparations. These trends together are quite a challenge for customs the world over. To check each and every postal package is hardly feasible. If customs in cooperation with industry can find an automised way to authenticate goods, it could decrease risks.

The report says that the EU-China customs action plan, which intensifies the contact between the respective customs, will be extended to 2012. The action plan was a pilot project and will now probably become institutionalised.
For those who can read German, read the Piracy report 2010 of the Federal finance ministry of Austria (in German): Produktpirateriebericht 2010 des Bundesministers für Finanzen (III-226 d.B.) , April 1, 2011.

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Sue Where The Assets Are: Reflex Packaging is suing former client Lenovo for patent infringement in US

By Michiel Tjoe-Awie

Reflex Packaging (Reflex) was supplying patented thermoformed cushions to pack Lenovo's computers. In 2008 Lenovo asked Reflex to remove their name and patent number from the packages. Reflex refused to do so, only to discover later that Lenovo continued to use the same patented package which were allegedly produced without there consent.

The Epoch Times' Matthew Robertson editor quoted Forrest Smith as saying: “The commentary from our counsel over in China was (…) frustrating, which was that your odds of suing successfully in China because of this are very low, because Lenovo is one of the ‘great sons of China.’ That was the message that I got back.” Lenovo is a former state-owned company, but still has ties with powerful Communist Part of China people.

The advice given above led to Reflex filing a lawsuit at the California Northern Disctrict Court in March 2010. Lenovo, which acquired the personal computer division of IBM in 2005, has many assets in the U.S since it is the fourth biggest computer manufacturer in the world and sells a lot of computers in the U.S.

Read more here.

Text Michiel Tjoe-Awie

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Joint-venture with technology transfer no panacea for market access to China's aviation industry

China's 12th Five-Year Plan (2011-2015) states that the general aviation industry's development will be
promoted, reform the airspace management system as well as increase the efficiency of the allocation and utilization of airspace resources. Bright sky for China's aviation industry. But what about foreign aviation companies, will they be able to takeoff or will they stay grounded.

Like all governments the Chinese government is giving its national aircraft corporation, the Commercial Aircraft Corporation of China, Ltd. (COMAC), support. The government made it obligatory for foreign aviation companies that want to supply to China to partner with COMAC and establish joint-ventures to get technology transfer via the ARJ21 and C919 projects. No company, including Western companies wants to give its intellectual property away without compensation. Therefore those Western companies that agreed to the terms of technology transfer for the C919 did so with old versions of their technology.

飞机

Cliff, Ohlandt and Yang write in their report 'Ready for Takeoff' sponsored by the U.S.-China Economic and Security Review (USCC) that joint ventures per se do not guarantee effective market access, but that the inverse, “those that do not provide access to coveted technologies or—even more problematically—are perceived to compete against domestic producers are not likely to receive preferential treatment and may indeed face severe obstacles.”

Read Roger Cliff, Chad J.R. Ohlandt, David Yang, Ready for Takeoff, China's Advancing Aerospace
Industry RAND National Security Research Division, sponsored by the U.S.-China Economic and
Security Review Commission, 2011, available here.

Wonderful characters 飞 fei 机 ji mean literally "bird machine" = airplane

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